The Securities and Exchange Commission rule requiring certain broker/dealers to register as investment advisers has provoked varied responses from the industry. On Jan. 31, the section of the rule requiring B/Ds to register as advisers if they hold themselves out to the public as financial planners, offer advice that is part of a financial plan or charge separate fees for advisory services, went into effect. Robert Plaze, associate director of the SEC's Division of Investment Management, said he has heard that broker/dealers have registered as IAs as a result of the rule. The SEC cannot determine precisely how many B/Ds have registered as advisers as a result of the rule, as that is not be disclosed on the registration application, Plaze said. Plaze told a Practising Law Institute conference in New York that the B/D Raymond James has taken all of its fee-based accounts into advisory accounts.

Duane Thompson, group director for advocacy of the Financial Planning Association in Washington, D.C., described instances of B/Ds curtailing the range of financial planning services they offer to avoid IA registration. One B/D, for example, told its registered reps they could only offer two out of the six components of a financial plan every six months, Thompson said. The firm appeared to be breaking its financial planning service into separate components to be offered over 18 months. "That's an absurd response to the rule," said Plaze, adding the firm probably had poor legal advice. Thompson said he knew of other B/Ds that have banned their use of financial planning software.

Separately, Plaze said the SEC's upcoming study of investor protections under the B/D and adviser regulatory schemes will examine the statutes that underlie the B/D rule.

"Do the statutes themselves need to be reviewed as the two industries move close together?" he asked. The SEC has not determined the structure of the study but plans to invite the public and industry to participate.